In the spring of 2005, the Bankruptcy Abuse Prevention & Consumer Protection Act (BAPCP) was signed into law by then-president George W. Bush. A fourteen-year-old piece of legislation filled with arcane detail might not seem like the juiciest topic, but the 2005 bankruptcy law promises to resurface in the ongoing Democratic presidential primaries—with possible implications for the law’s future.
BAPCP was passed due to a belief that easy access to credit in general and bankruptcies in particular were fueling the economic bubble that eventually led to the recession of 2008. The goal of the legislation was to make filing for bankruptcy more difficult.
Joe Biden, then a Democratic senator from Delaware and today the presumed frontrunner for his party’s presidential nomination, was instrumental in pushing the bill through the Senate. Elizabeth Warren, then a consumer advocate and today a Democratic senator from Massachusetts and rival to Biden in the presidential campaign, was an outspoken critic. The differences between the candidates, buried for 14 years, have started to resurface.
The belief in Biden’s camp is that bankruptcy was being filed by people who really could afford to pay off their debts, including unsecured debt like credit card bills. They argue that abuse of the process was making the cost of credit higher than it had to be and creating a drag on the economy.
Warren believes that affordable access to bankruptcy filing is essential to the social safety net and has a particular impact on divorced women, often responsible for raising their children by themselves. The ability to use bankruptcy as a way of dealing with potentially crushing medical debts, for example, was instrumental in keeping people above the poverty line.
While it’s unlikely that this particular presidential primary will swing on a 14-year-old bankruptcy vote, the debate and public reaction to it might give us an insight as to where bankruptcy law might be going in the future.
